Automation, Human Task Innovation, and Labor Share: Unveiling the Role of Elasticity of Substitution

Jeong, Deokjae and Baek, Seungjin and Peri, Giovanni (2024): Automation, Human Task Innovation, and Labor Share: Unveiling the Role of Elasticity of Substitution.

Abstract

This study examines the global decline in labor share since the 2005, focusing on the impacts of robotic and human innovation within a general equilibrium framework. Using novel shift-share variables ---operational robot data, patent similarity to automation vocabularies, and cognitive task intensity scores--- the research addresses endogeneity issues across countries and sectors. Findings reveal that while robotic innovation negatively impacts labor share, human innovation exerts a predominantly positive influence, largely offsetting automation's effects. Additionally, we find the elasticity of substitution between labor and capital is less than one, aligning with much of the literature. The paper acknowledges two primary limitations. First, the price factors are not exogenous. Second, fixed effects account for a significant proportion of the observed decline in labor share.

• Item Type: MPRA Paper
• Language: English
• Keywords: Human task innovation; Robotic innovation; Automation; Labor share Elasticity of substitution
• Subjects: D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; D - Microeconomics > D3 - Distribution > D33 - Factor Income Distribution; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E25 - Aggregate Factor Income Distribution; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J23 - Labor Demand; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries

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